Kotis v. Nowlin Jewelry, Inc.

Steve Sitton fraudulently obtained a gold rolex watch from Nowlin Jewelry, Inc. (Nowlin’s) (plaintiff) by forging a check for the watch’s purchase price of $9,438.50. Eddie Kotis (defendant), a used car dealer, purchased the watch from Sitton for $3,550 in Kotis’s car lot. Upon a friend’s advice, Kotis contacted Nowlin’s to determine whether Sitton had financed the watch. Kotis spoke with Cherie Nowlin, the wife of Nowlin’s president, John Nowlin. Kotis did not initially identify himself or reveal Sitton’s asking price for the watch. Kotis also stated that he did not have or want the watch. After learning that Sitton’s check would not be honored by the bank, John Nowlin called Kotis. Kotis refused to speak and referred John to Kotis’s attorney. Sitton was subsequently indicted for forgery and theft. Nowlin’s sought a declaratory judgment that it was the watch’s sole owner. Kotis filed a counterclaim, seeking a declaration that he was a good faith purchaser entitled to possess and hold title to the watch. The trial court found that Nowlin’s was the watch’s sole owner. The court made several additional findings, including that Sitton did not obtain the watch through a “transaction of purchase” with Nowlin’s, within the meaning of Tex. Bus. & Com. Code Ann. § 2.403(a). The statute provided that a person with voidable title may transfer good title to a good faith purchaser for value if the goods were delivered through fraud, provided the goods were delivered under a “transaction of purchase.” On appeal, Kotis claimed that the trial court erred in finding that: (1) Sitton did not obtain the watch through a transaction of purchase with Nowlin’s, (2) Sitton did not have voidable title, and (3) Kotis lacked good title because he was not a good faith purchaser.